Electronic Signatures
Electronic signatures - e-Contracting digital signature software
This document is designed to help you understand what electronic signatures (e-signatures) are, and how e-Contracting software can bring this useful advancement to your business. Electronic signatures are not digital signatures.
If you have any questions about electronic signature software, please don't hesitate to contact us for more information.
All about Electronic Signatures
First, what is a signature?
A signature is any symbol executed or adopted by a party with the intention to authenticate a writing. The key is that there's no requirement this be ink on paper, but instead shows that it can be any symbol provided the symbol is used with the intent of signing. This is why copies of signatures (such as on a fax), stamps or seals, and fingerprints can be used for signing on paper.
What is an electronic signature?
Like the signature above, an electronic signature is an electronic mark that's related to the electronic record or data that is being signed, such that the user has applied that symbol to indicate his intent to sign. It is important that the electronic symbol be related specifically to the party who is signing, that there's proof the symbol was applied with intent to sign, that the data being signed can be proven to be the original data (hasn't been tampered with), and be such that all parties to a signature are allowed to have independent copies.
How is electronic signature defined in the U.S. E-SIGN Act?
From Section 106 (Definitions), "The term 'electronic signature' means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record."
However, for such an electronic "symbol" to be legally binding, it is important that the symbol provide authentication of the party who created it, ensure that what was signed cannot be altered, ensure that the party understood that by creating the symbol the party was willingly signing, and that the party is able to keep an original of the data and his electronic signature for his own records. This is why an "I Agree" button isn't sufficient (it typically lacks authentication, does not ensure that the data agreed to cannot be changed later, and does not provide the user with an electronic copy of the data and the signature for his own records).
What do the courts say about electronic signatures?
Lawsuits are rarely filed to contest whether something was signed, but instead focus on whether the parties lived up to the obligations outlined in a document, and what the reasonable meaning is behind the terms in the document. Case law throughout the United States has repeatedly upheld the legality of electronically signed documents. In fact, simple email has been found to be legally binding in terms of contract law because promises and intent can be determined and thus the parties are held accountable.
Electronic signature laws and regulations
- Here is a complete list of electronic signature laws in the various United States
- Learn more about electronic signature legislation in the United States. Most of the laws began with the Utah Digital Signature Act of 1995 and was focused on a narrow set of digital signature technologies based on PKI. California realized that focusing on specific technologies in law was pointless because technology advances so quickly, and the PKI-based solutions had proven cumbersome and expensive for anything but the most secure needs within a small network of people, hardly the stuff of global e-commerce or a concern for common contracts law. Instead, California chose a minimalist and technology neutral approach, which became the foundation of the U.S. E-SIGN Act and has been replicated in other countries as well.
- In order to avoid each American state from having conflicting laws, the National Conference of Commissioners on Uniform State Laws developed the Uniform Electronic Transactions Act (UETA), while the European Union proposed its Directive on a Common Framework for Electronic Signatures for the European Union.
- In the United States, all of these incompatible state laws were superseded by the Electronic Signatures in Global and National Commerce Act (US E-SIGN ACT). This act was signed into law in 2000 by President Clinton. It is technology neutral, provided certain disclosures are provided and the basic requirements of electronic signatures (as described above) are followed. It lists several areas where electronic signatures are not yet allowed (see "Can anything be signed electronically?" below). Fortunately, this means that they are legal for 99.99% of all documents, including business contracts, agreements, applications, authorizations, loans, leases, employment documents, etc.
- In the health care field, the main piece of legislation is the Health Insurance Portability and Accountability Act (HIPAA), overseen by the U.S. Department of Health and Human Services (HHS). But it's much broader than just hospitals and clinics and includes therapists, lawyers dealing with medical issues, health insurance companies, clearinghouses and all individuals who seek medical treatment. It's primary purpose is to protect the privacy of patients' private health information. This law not only discusses electronic signatures, it also specifies transaction code sets, security procedures and privacy considerations.
- The Food and Drug Administration 21 CFR Part 11 (FDA CFR Part 11) is more formally known as Title 21 Code of Federal Regulations Electronic Records; Electronic Signatures. The regulations provide guidance for the use of electronic records and electronic signatures in the biotechnology, pharmaceutical, medical devices, radiological health, food, cosmetics and veterinary medicine fields.
- The European Union operates under the European Directive 1999/93/EC and its technical specification ETSI TS 101 903 v1.4.1 XML Advanced Electronic Signatures.
Concerns when using Electronic Signatures
Is it legal?
Yes, electronic signatures are legally recognized, even when a statute uses terms like "in writing" or "signed."
Can anything be signed electronically?
Not everything, but most common documents can be. The ESIGN Act specifically forbids a narrow range of documents that may not be signed electronically. The exceptions primarily relate to wills, codicils and testamentary trusts; adoptions, divorce or other matters of family law; the Uniform Commercial Code, as in effect in any State, other than sections 1-107 and 1-206 and Articles 2 and 2A; court orders, notices and official court documents (including briefs, pleadings and other writings) used in connection with court proceedings; notices of cancellation or termination of utilities; notices of default, acceleration, repossession, forecloseure or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence; notices of cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities); notices of product recalls or material failure of a product that risks endangering health or safety; or documents related to transportation or handling of hazardous materials, pesticides or other toxic or dangerous materials.
More on electronic signatures
If you have more questions, please read the our electronic signature FAQ. Electronic signatures are simply superior and more reliable than handwritten signatures. Electronic systems often are more secure, direct, faster and cheaper than faxing, mailing or courier services. Record retention, offsite backups, auditing, tracking and finding electronic documents is much cheaper, easier and can be automated. Read more on Wikipedia.